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  • Alexander Wissel

Low Ball Home Offers: Here’s How to Use Them Effectively

How Low Can You Go?

  • Understand the concept of a low ball home offer and its purpose.

  • Identify situations where making a low ball offer might be appropriate.

  • Learn essential tips for effectively making and negotiating a low ball offer.

Here’s How to Use Low Ball Home Offers - Source:
Here’s How to Use Low Ball Home Offers

When it comes to buying a home, everyone wants to get a good deal. No one wants to feel like they’ve overpaid. Some buyers think the only way to get a deal is to offer much less than the listing price – these are known as low ball home offers.

In a hot market with lots of demand, and little inventory, there isn’t a lot of reasons why you should put low ball offers in. However, there are few instances where you might consider making a low ball offer.

In this article, we will explore more specifically what a low ball home offer is, when it might be appropriate to use one, and provide you with some essential insights to help you navigate this aspect of the home buying process.

A low ball home offer is an offer made significantly below the asking price or market value of a property, aiming to test the seller's willingness to negotiate and potentially secure a better deal.

What is a Low Ball Home Offer?

A low ball home offer refers to making an offer significantly below the asking price or market value of a property. This tactic is employed by buyers who believe they can secure a better deal or negotiate a more favorable price.

Constantly remember that sellers and their agents work hard to select a listing price. I have had my share of clients who wanted to ‘test’ certain prices I’ve felt were too high. But most of the time our numbers are based on comparables and facts.

For example: If a home is listed for $500k and a buyer wants to offer $440k, that would be considered a low ball offer. If the offer was $485k to $495k it would be considered below asking price, but not necessarily a low-ball offer.

The main idea behind a low ball offer is to test the seller's willingness to negotiate and potentially save some money on the purchase. Buyers who consistently offer low-ball offers may get very frustrated with their lack of success. To make a low-ball offer work you need the right conditions.

When is a Low Ball Offer Inappropriate?

Time on Market: If a home has been on the market for less than a week it’s not appropriate to put in a low ball offer. You can have your agent reach out to the listing agent to see what kind of interest they have. If the listing agent has have crickets then they will encourage your to write the offer.

Property Condition: When home has serious issues and needs substantial work a low ball offer is appropriate. If a home needs a new roof or has a material flaw it makes more sense to write a low ball offer.

If we look at our $500k home, let’s say it needs a new roof and HVAC costing $50k. You would first check out the comparable homes to see if any sold without those updates. If they have then you would probably offer less than the full cost of the repairs. In this example you might low-ball you offer at $475k – about half of the cost of repairs.

You could offer $450k, but then your odds of them accepting go down. Here’s why~ The seller’s could decide to offer a $25k credit, or they could decide to simply wait if the market is hot. If the seller has a mortgage at 6%, their carrying costs are roughly $3,000 a month.

If they don’t have to sell, they can afford to hold that property for over 16 months of mortgage payments before will take a loss of $50k.

Pro Tip: This is a good calculation to use when offering below ask price. Calculate their carrying cost and ask how many months are you asking them to sacrifice for your offer. An offer $12k below a $500k asking price is 4 months of carrying costs.

If they think they can get a better offer, they could wait. If they believe that may not get a better price in 4 months, they are more inclined to accept. Especially if the home has been on the market for a month or two.

If you are requiring your agent to put in substantially low offers on every home you see, you are wasting your time and theirs. Remember that real estate is a relationship business that involves communication. If someone feels you are being insulting or not being serious, they simply won’t entertain anything from you. A low-ball offer at the wrong time can sour communications with a seller for good.

When is a Low Ball Offer Appropriate?

So when is a low ball offer appropriate? There are a few scenarios where a low ball offer might be justified, and even welcomed.

Time on the market: If a home has been listed for a considerable time without attracting much interest or offers, the seller may be more open to negotiating and considering a lower offer.

This amount of time depends upon the type of property and the local conditions. Vacant land often sits for months, if not years, before it’s sold. Single family homes in recent markets have been selling within a few days or weeks.

Your real estate agent can see what the average time a home has been on the market by zip code. If home has been sitting for two to three times what the average time on market is, then it might make sense.

Seller's motivation: Life events, such as job relocation, financial constraints, or divorce, may create a sense of urgency for the seller. In these cases, they might be more inclined to entertain lower offers to expedite the selling process.

Your agent may be able to find this out from the listing agent. Often a seller’s motivation is something that shouldn’t be disclosed without their permission, but real estate agents can get chatty and disclose more than they should.

Property requires significant repairs or updates: If the property you're interested in requires substantial repairs or updates, it can be reasonable to make a lower offer to account for the additional expenses you'll need to incur.

This is one of the biggest reasons to offer under asking price is to account for significant repairs that the seller didn’t make. Comparing a home to similar homes that have sold is important here.

Local market conditions favor buyers: In a buyer's market, where the supply of homes exceeds the demand, sellers may be more willing to consider lower offers to attract potential buyers. We haven’t seen a market like that in some time, but local conditions can change quickly.

Tips for Making a Low Ball Offer

Now that we've discussed when a low ball offer might be appropriate, here are some tips to help you navigate the process effectively:

Reach out to the Listing Agent: Have your agent reach out to the listing agent and ask if the seller’s would be open to an offer below list price. That conversation alone can help the discussion as opposed to a low-ball offer that shows up unannounced. You might find out that the sellers are prepared to wait years to sell to get their price.

Research and analyze the market: Conduct thorough research on recent comparable sales in the area. Know your comparable prices and their features. If your home needs a roof, know whether that roof will cost $20k or $9k.

Assess the Seller's Situation: Understanding the seller's motivation and circumstances can give you an advantage. This is where your agent should be earning their money. If possible, have them gather information that might influence the seller’s willingness to negotiate.

Remember that people have a lot of emotions wrapped up in their homes. Their motivations to sell and why are important. I’ve seen more sellers choose offers on their home that weren’t the highest because they felt another buyer loved their home more. Emotions run high with homes.

Craft a Respectful and Reasonable Offer: While the offer may be lower than the asking price, it's crucial to present it in a respectful and reasonable manner. Justify your offer by highlighting any relevant factors such as necessary repairs or market conditions.

This might be the most important part… Be respectful and show numbers as to why you are offering less than their listing price. If you're just trying to screw over the seller I'd suggest you have the wrong mindset. Don’t get too greedy or you give them reason to wait.

Be Prepared for Negotiation: The seller may counter your offer or reject it outright. Be prepared to engage in negotiations and have a clear understanding of your maximum budget and limits. Real estate is a discussion, so be prepared to discuss what you feel is the ‘correct’ number for that home. Understand that you may never reach a consensus.

Should You Use Low Ball Home Offers?

A low ball home offers can be a strategic tool to secure a favorable deal in the right situation. But it should be used sparingly and carefully.

Assess the market, evaluate the seller's situation, and craft a respectful offer that reflects the property's value and your own circumstances.

Remember, the goal is to negotiate effectively while maintaining a positive and professional relationship with the seller. By considering these factors, you can make informed decisions and increase your chances of success when making a low ball offer.


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